International Financial Reporting Standards (IFRS) and Income Smoothing Activities of Banks: Evidence from Australia and New Zealand Commercial Banks
22 Pages Posted: 1 Dec 2010 Last revised: 29 Apr 2018
Date Written: November 30, 2010
This study investigates the impact of IFRS on income smoothing activities through loan loss provisions of Australia and New Zealand banks for the period of 1995-2009. Prior to IFRS implementation, bank loans provisioning is subject to managerial manipulation, possibly due to the weakness in GAAP that provides room for managers to manage earnings. We conjecture that the robust disclosure requirements under IFRS could mitigate income smoothing activities of the IFRS adopters. Our paper examines the effects of IFRS adoption on Australia and New Zealand banks as previous studies give much attention to European Union (EU) sample case. The results indicate that there is no concrete evidence that IFRS, particularly IAS 39 is associated with mitigating income smoothing activities of banks in Australia and New Zealand. However, income smoothing activities do decline in public listed banks of Australian banks after IFRS adoption.
Keywords: IFRS, bank income smoothing
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